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Design Build Contracts: Getting it Right

Posted by Raymond Perr, PE

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Nov 15, 2017 4:19:16 PM

In today’s global market place, the Coal industry must spend its capital and maintenance dollars effectively to remain competitive.

“Design Build Contracts” (DBC) consistently deliver projects that meet this goal.

Performance guarantees can be more effectively achieved, and many of the questions of responsibility that arise between the design, construction and commissioning phases of a project can be eliminated. Expanded collaboration between the Owner and the Contractor in planning, budgeting and scheduling that occurs during the procurement process and prior to the costs and commitments associated with a final design is also an important advantage.

So, what are the significant differences between more conventional construction contracts and DBC that result in these advantages, and when do they work best? 

What is Design-Build?

What is Design Build

Instead of separating the final design engineering and the construction into separate contracts, both are purchased as one contract from a single company qualified and experienced in both areas. Understanding how the process works is essential to successfully using this method and being able to fully benefit from all of the advantages.

Qualifying companies and evaluating their ability to provide both the engineering and construction under one contact is the most challenging and important parts of the process. Selecting the right firm eliminates many future problems. This process should include establishing that key management, engineering staff and construction personnel that will be assigned to the project for each company being considered have the necessary experience related to that specific project.  Experience with similar projects and past success should be two of the most important factors in the qualification process.

Be cautious of separate companies that individually have the necessary experience and qualifications and that want to join forces but have not previously worked together on a project. Developing the necessary coordination to be successful should not be an encumbrance to the project.

Design-Build Project Definition and Scope

Project definition and scope must be established, which includes:

  • Performance requirements
  • Process diagrams
  • General arrangement drawings
  • Major equipment sizing
  • Quality specification
  • Maintenance requirements
  • & other relevant items

Frequently, this involves coordination between several groups within the company with different perspectives and agendas. It often requires balancing between expenditure and desire for increased capacity, ease of maintenance, durability or other features. The level of detail included can vary depending on the project but must include enough information to clearly define the scope of the project.

Process flow diagrams, for example, should provide a clear description of the overall process, performance requirements and capacities for the major components. General arrangement drawings should provide a level of detail to show basic concepts and definition of the project.  Selection of major equipment is normally part of this process.

Rather than using this information to develop a final design package to be used to bid a separate construction contract, the DBC method incorporates the project scope definition with typical commercial and material specifications to solicit pricing for both the design and the construction as one package.

Advantages of Utilizing a Design-Build Contractor

So, what are the advantages of using the DBC method? 

  • They include the ability to take better advantage of the expertise and experience of each of the Design Build Contractors bidding on the project prior to the commitment of a final design and awarding the construction contract.
  • Pricing of alternatives can be more accurately established to support the process of balancing project desires with budget constraints prior to making these commitments.
  • Other advantages include consolidation of responsibility and improved scheduling.

Contractors should be required to submit pricing based on the information provided in the bid documents. Each bidder should be required to review the information presented in the bid documents as necessary to assure they can guarantee the specified performance requirements. Any issues should be identified and resolved at this phase of the process.

Contractors should also be encouraged to provide value engineering alternatives. These may include changes to the general arrangement, modification to the process flow diagram or any other potential ideas to save dollars and still delivers all of the project objectives.

The advantage of including the contractor experience, along with the experience and knowledge of the owner and designers prior committing to a final design, adds value to the process. Taking advantage of their additional understanding of costs, steel fabrication, constructability issues and scheduling can result in cost savings.

Understanding these issues prior to the commitment of a final design is important as potential problems can often be most effectively resolved during the design phase. 

Design Build Contracts

Unlike Design-only Firms, Design Build Firms also understand that to be successful, they must develop the most cost-effective design and constructible project to be competitive and win the contract. This gives them incentive to innovate and produce new ideas and methods to achieve the project objectives. Including the experience of the contractor, steel fabricators and subcontractors in this process along with the design engineers results in additional ideas and alternatives. Having each of these priced separately allows them to be evaluated independently as compared to the base scope defined in the bid package.

Total project schedule can be substantially reduced using the DBC as compared to separating the design and the construction contracts. Schedule savings are realized as the result of bidding the project immediately after the project scope has been established, without the time necessary to completely finish the final design. The Design Build Contractor can begin construction while much of the final design is being competed.

For example, foundation construction can begin prior to the completion of all the structural steel design. Reduced schedule translates into cost savings associated with less fixed costs and the ability to take advantage of the completed project benefits sooner.

Design Build Contracts

Consolidation of responsibility to include both design and construction into one contract is a key advantage. Construction change orders related to design issues, and the costs involved in coordinating the two separate contracts are eliminated. Issues that do arise during construction can be resolved faster and more efficiently internally at one firm, as compared to two separate organizations with an owner in between. The costs that are associated with identifying responsibility are also reduced.

Design Build Contracts clearly assign the responsibility for guaranteed performance requirements to one company. Accomplishing the project’s performance goals is the most important criteria in judging the success of a project. Not achieving specified product capacities, quality or other process requirements have the most damaging impact on the economic success of a project.  Separating the design from the construction contracts results in potential questions of responsibly when this is not achieved. During the commission process, the project either meets the performance requirements or the Design Build Contractor is responsible to make the necessary modification, relieving the owner of these responsibilities. 

Industrial Resources | Coal Processing Facility

Coal mining is one of the most capital-intensive industries, involving large expenditures that require designing and constructing new processing facilities, material handling equipment and major maintenance projects on an almost continuous basis. To be successful, it is essential that these dollars be spent effectively and that the projects meet performance requirements. Design Build Contracts offer the best solution to meet these goals.

Want to talk with us about your next processing facility? Call (304) 363-4100. 

Learn More About Coal Preparation Plant Construction 

Raymond Perr, PE

Written by Raymond Perr, PE

Raymond Perr P. E. Director of Business Development Industrial Resources, Inc P.O. Box 514 Carnegie, PA. 15106 Office - 412-279-8834 Cell - 304-534-1820

Topics: Design Build Contractor

About Industrial Resources:

Industrial Resources has over 200 combined years of service in the mineral industry. Our greatest service is the ability to produce in situations where others were unable to. We are proud to design and build projects on schedule and within the customers' budget.

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